AOL's Patch: Big Losses on Hyperlocal News

In the fall of 2009, a group of journalists and publishers gathered in Manhattan to hear Jeff Jarvis, a Web evangelist and blogger, deliver a talk about the bright future of “hyperlocal” news. Jarvis told the assembled group that even as small- and mid-sized papers were closing down, community journalism was being remade by thousands of independent, local bloggers. And these solo news artists appeared to be making good money: Bloggers working in communities with 50,000 individuals were pulling in $200,000 a year in advertising revenue, according to a study from the City University of New York’s Graduate School of Journalism, where Jarvis is a professor.

Two-and-a-half years later, the notion of bloggers making six-figure incomes by chronicling town hall meetings, police blotter reports, and high school sports looks more like a fading dream than a bankable reality. Case in point: AOL. On May 25, a group of investors known as Starboard Value—which owns 5.3 percent of AOL and is fighting for three seats on the board of directors—published a lengthy critique of the company’s management. The sharpest words were reserved for AOL’s continued, heavy investment in Patch, the company’s network of 863 locally staffed community news sites, which AOL CEO Tim Armstrong founded and sold to AOL after joining the company. In 2011, according to Starboard’s estimates, Patch lost $147 million while generating a mere $13 million in ad revenue—roughly $15,000 per site. “We do not believe Patch is a viable business,” the Starboard report said.